- --------------------------------------------------------------------------------
FIRST PRIORITY
- --------------------------------------------------------------------------------
LIMITED MATURITY
- --------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
FUND
- --------------------------------------------------------------------------------
(A Portfolio of First Priority Funds)
SUPPLEMENT TO PROSPECTUS
DATED DECEMBER 7, 1993
March 31, 1994
--------------------
FEDERATED SECURITIES CORP.
---------------------------------- --------------------
(LOGO)
--------------------
--------------------
Distributor
A subsidiary of FEDERATED INVESTOR
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
G00134-01 (6/94)
------------------
A. Please delete the "Summary of Fund Expenses" table on page 1 and replace it
with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......... 2.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)............................................................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)................. None
Exchange Fees....................................................................... None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fees(2)....................................................................... 0.00%
Other Expenses...................................................................... 0.38%
Total Operating Expenses....................................................... 0.38%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management fee
is 0.70%.
(2) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until a separate class of
shares has been created for certain institutional investors. The Fund can pay up
to 0.25% as a 12b-1 fee to the distributor.
* Total Operating Expenses are estimated to be 1.08% based on average expenses
expected to be incurred during the period ending November 30, 1994. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "FIRST PRIORITY FUNDS INFORMATION" AND "INVESTING IN THE FUND."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return; (2) redemption at the end of each time period; and (3)
payment of the maximum sales load of 2%. The Fund charges no redemption
fees....................................................................... $ 24 $32
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1994.
B. Please insert the following "Financial Highlights" table as page 2 following
the "Summary of Fund Expenses" and before the section entitled "General
Information." In addition, please add the heading "Financial Highlights" to
the Table of Contents on page I after the heading "Summary of Fund Expenses."
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994*
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------
Net investment income 0.19
- ---------------------------------------------------------------------------------
Net realized and unrealized loss on investments (0.29)
--------------------------------------------------------------------------------- -----
Total from investment operations (0.10)
- ---------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.19)
- --------------------------------------------------------------------------------- -----
NET ASSET VALUE, END OF PERIOD $9.71
- --------------------------------------------------------------------------------- =====
TOTAL RETURN** (1.01)%
- ---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------
Expenses 0.39%(a)
- ---------------------------------------------------------------------------------
Net investment income 4.18%(a)
- ---------------------------------------------------------------------------------
Expenses waiver/reimbursement (b) 0.70%(a)
- ---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $47,198
- ---------------------------------------------------------------------------------
Portfolio turnover rate 6%
- ---------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 13, 1993 (date of initial
public investment) to May 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
C. Under the sub-section entitled "What Shares Cost" on page 11, replace the
table with the following:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
---------------------------------- ----------------------- ---------------------
<S> <C> <C>
Less than $100,000................. 2.00% 2.04%
$100,000 but less than $250,000.... 1.50% 1.52%
$250,000 but less than $500,000.... 1.00% 1.01%
$500,000 but less than $750,000.... 0.50% 0.50%
$750,000 but less than $1 million.. 0.25% 0.25%
$1 million or more................. 0.00% 0.00%
</TABLE>
D. Please replace the two paragraphs under the sub-section entitled "Dealer
Concessions" on page 11 with the following:
"A dealer will normally receive up to 85% of the applicable sales charge. Any
portion of the sales charge which is not paid to a dealer will be retained by
the distributor. However, the distributor, at its sole discretion, may
uniformly offer to pay to a dealer selling shares of the Fund all or a
portion of the sales charge it normally retains. If accepted by a dealer,
such additional payments will be predicated upon the amount of Fund shares
sold. Such payments may take the form of cash or promotional incentives, such
as payment of certain expenses of qualified employees and their spouses to
attend the informational meetings about the Fund or other special events at
recreational facilities, or items of material value. In some instances, these
incentives will be made available only to dealers whose employees have sold
or may sell significant amounts of shares."
E. Please insert the following sub-section entitled "Other Payments to Financial
Institutions" on page 11 under the section entitled "Dealer Concessions." In
addition, please add the heading "Other Payments to Financial Institutions"
to the Table of Contents on page I, following the heading "Dealer
Concessions."
"Other Payments to Financial Institutions. The distributor, the adviser, or
their affiliates may also offer to pay a fee from their own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include initiating customer
accounts, providing sales literature, or participating in sales, educational
and training seminars (including those held at recreational facilities). Such
assistance will be predicated upon the amount of shares the financial
institution sells or may sell and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made
by the distributor may be reimbursed by the adviser or its affiliates."
F. Under the sub-section entitled "Reducing the Sales Charge" on page 12, add
the following as the last bullet point:
"- purchases with proceeds from redemptions of unaffiliated mutual fund
shares."
G. Under the sub-section entitled "Quantity Discounts and Accumulated Purchases"
on page 12, replace the second sentence of the second paragraph with the
following:
"For example, if a shareholder already owns shares having a current value at
the public offering price of $90,000 and purchases $10,000 more at the
current public offering price, the sales charge on the additional purchase
according to the schedule now in effect would be 1.50%, not 2.00%."
H. Please insert the following sub-section entitled "Purchases with Proceeds
from Redemptions of Unaffiliated Mutual Fund Shares" on page 13 immediately
following the sub-section entitled "Reinvestment Privilege." In addition,
please add the heading "Purchases with Proceeds from Redemptions of
Unaffiliated Mutual Fund Shares" to the the Table of Contents on page I,
following the heading "Reinvestment Privilege."
"Purchases with Proceeds from Redemptions of Unaffiliated Mutual Fund Shares.
Investors may purchase shares of the Fund at net asset value, without a
sales charge, with the proceeds from the redemption of shares of a mutual
fund which was sold with a sales charge or commission. The purchase must be
made within 60 days of the redemption, and FAII must be notified by the
investor in writing or by his financial institution, at the time the purchase
is made. The adviser will offer to pay broker/dealers an amount equal to .50
of 1% of the net asset value of Shares purchased by their clients or
customers in this manner. This offer is not available for the redemption of
mutual fund shares that were or would be subject to a contingent deferred
sales charge upon redemption."
I. Under the sub-section entitled "Voting Rights" on page 16, please insert the
following information as the third paragraph, which will be on page 17:
"As of May 31, 1994, HUBCO c/o First Alabama Bank, may, for certain purposes,
be deemed to control the Fund because it is the owner of record of certain
shares of the Fund."
J. Please insert the following financial statements at the end of the prospectus
beginning as page 19. In addition, please add the heading "Financial
Statements" to the Table of Contents on page I, immediately before
"Addresses."
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
CORPORATE BONDS--12.2%
- ------------------------------------------------------------------------------------
BASIC INDUSTRY--1.0%
------------------------------------------------------------------
$ 500,000 WMX Technologies, 4.875%, 6/15/96 $ 485,125
------------------------------------------------------------------ -----------
BEVERAGES--1.1%
------------------------------------------------------------------
500,000 Pepsico, Inc., 5.875%, 12/15/94 500,045
------------------------------------------------------------------ -----------
ELECTRICAL POWER--1.1%
------------------------------------------------------------------
500,000 Virginia Electric & Power Co., 6.375%, 3/1/95 502,100
------------------------------------------------------------------ -----------
FINANCE-AUTOMOTIVE--2.0%
------------------------------------------------------------------
500,000 Ford Motor Credit Corporation, 5.15%, 3/15/96 468,885
------------------------------------------------------------------
500,000 Ford Motor Credit Corporation, 5.625%, 1/15/99 487,725
------------------------------------------------------------------ -----------
Total 956,610
------------------------------------------------------------------ -----------
FINANCE-COMMERCIAL--1.0%
------------------------------------------------------------------
500,000 Associates Corp. of North America, 4.50%, 2/15/96 485,320
------------------------------------------------------------------ -----------
PHARMACEUTICAL--1.0%
------------------------------------------------------------------
500,000 SmithKline Beecham PLC, 5.25%, 1/26/96 491,900
------------------------------------------------------------------ -----------
RETAIL--1.0%
------------------------------------------------------------------
500,000 Dayton Hudson Corp., 4.65%, 3/11/96 486,565
------------------------------------------------------------------ -----------
SECURITIES--1.1%
------------------------------------------------------------------
500,000 Lehman Brothers Holdings, Inc., 4.94%, 6/23/95 494,760
------------------------------------------------------------------ -----------
</TABLE>
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------
TELECOMMUNICATIONS--2.9%
------------------------------------------------------------------
$ 500,000 AT&T Corp., 4.50%, 2/15/96 $ 485,035
------------------------------------------------------------------
1,000,000 Illinois Bell Telephone Co., 5.80%, 1/1/2004 891,180
------------------------------------------------------------------ -----------
Total 1,376,215
------------------------------------------------------------------ -----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $6,028,755) 5,778,640
------------------------------------------------------------------ -----------
U.S. GOVERNMENT AGENCIES--9.7%
- ------------------------------------------------------------------------------------
1,000,000 Federal Home Loan Bank, 6.16%, 1/4/2004 898,200
------------------------------------------------------------------
500,000 Federal National Mortgage Association, 6.40%, 1/13/2004 455,220
------------------------------------------------------------------
500,000 Federal National Mortgage Association, 5.12%, 1/22/99 465,350
------------------------------------------------------------------
1,000,000 Federal National Mortgage Association, 6.28%, 2/3/2004 916,270
------------------------------------------------------------------
1,000,000 Federal Home Loan Mortgage Corp., 6.27%, 1/27/2004 902,190
------------------------------------------------------------------
1,000,000 Federal Home Loan Mortgage Corp., 4.75%, 2/2/99 939,370
------------------------------------------------------------------ -----------
TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $4,983,359) 4,576,600
------------------------------------------------------------------ -----------
U.S. TREASURY OBLIGATIONS--59.0%
- ------------------------------------------------------------------------------------
U.S. TREASURY BILLS--2.1%
------------------------------------------------------------------
1,000,000 6/2/94 999,380
------------------------------------------------------------------ -----------
U.S. TREASURY NOTES--56.9%
------------------------------------------------------------------
1,000,000 4.25%, 7/31/94 1,000,040
------------------------------------------------------------------
1,000,000 4.25%, 8/31/94 999,760
------------------------------------------------------------------
1,000,000 4.25%, 10/31/94 998,170
------------------------------------------------------------------
500,000 6.00%, 11/15/94 502,435
------------------------------------------------------------------
500,000 4.625%, 11/30/94 499,240
------------------------------------------------------------------
500,000 4.625%, 12/31/94 497,440
------------------------------------------------------------------
1,500,000 4.25%, 1/31/95 1,492,380
------------------------------------------------------------------
1,000,000 3.875%, 2/28/95 990,500
------------------------------------------------------------------
1,000,000 3.875%, 3/31/95 988,920
------------------------------------------------------------------
1,000,000 3.875%, 4/30/95 986,960
------------------------------------------------------------------
500,000 4.125%, 5/31/95 494,085
------------------------------------------------------------------
</TABLE>
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------
U.S. TREASURY NOTES--CONTINUED
------------------------------------------------------------------
$ 1,000,000 4.125%, 6/30/95 $ 986,850
------------------------------------------------------------------
500,000 4.25%, 7/31/95 493,075
------------------------------------------------------------------
1,500,000 4.625%, 8/15/95 1,484,520
------------------------------------------------------------------
500,000 3.875%, 8/31/95 490,175
------------------------------------------------------------------
500,000 3.875%, 9/30/95 489,240
------------------------------------------------------------------
1,000,000 3.875%, 10/31/95 975,980
------------------------------------------------------------------
500,000 5.125%, 11/15/95 496,265
------------------------------------------------------------------
500,000 4.625%, 2/15/96 489,950
------------------------------------------------------------------
1,000,000 5.125%, 3/31/96 986,470
------------------------------------------------------------------
1,500,000 5.50%, 4/30/96 1,487,205
------------------------------------------------------------------
1,000,000 4.25%, 5/15/96 968,660
------------------------------------------------------------------
1,000,000 5.875%, 5/31/96 997,490
------------------------------------------------------------------
1,000,000 4.375%, 8/15/96 965,320
------------------------------------------------------------------
1,500,000 4.375%, 11/15/96 1,439,400
------------------------------------------------------------------
1,000,000 5.125%, 11/30/98 939,530
------------------------------------------------------------------
1,500,000 5.125%, 12/31/98 1,407,405
------------------------------------------------------------------
1,000,000 5.00%, 1/31/99 932,310
------------------------------------------------------------------
500,000 5.50%, 4/15/2000 468,445
------------------------------------------------------------------
1,000,000 5.75%, 8/15/2003 905,200
------------------------------------------------------------------ -----------
Total 26,853,420
------------------------------------------------------------------ -----------
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $28,539,616) 27,852,800
------------------------------------------------------------------ -----------
</TABLE>
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ -----------
<C> <C> <S> <C>
MUTUAL FUND SHARES--6.6%
- ------------------------------------------------------------------------------------
2,000,000 Franklin Funds Institutional Money Market Portfolio $2,000,000
------------------------------------------------------------------
1,108,825 Goldman Sachs I.L.A. Treasury Portfolio 1,108,825
------------------------------------------------------------------ -----------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 3,108,825
------------------------------------------------------------------ -----------
*REPURCHASE AGREEMENT--12.0%
- ------------------------------------------------------------------------------------
$ 5,640,258 HSBC, 4.25%, dated 5/31/94, due 6/1/94
(AT AMORTIZED COST) (NOTE 2B) 5,640,258
------------------------------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST $48,300,813) $46,957,123+
------------------------------------------------------------------ -----------
</TABLE>
* Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations, based on market prices at May 31, 1994.
+ The cost of investments for federal tax purposes amounts to $48,300,813. The
net unrealized depreciation of investments on a federal income tax basis
amounts to $1,343,690 and is comprised of $1,343,690 depreciation at May 31,
1994.
Note: The categories of investments are shown as a percentage of net assets
($47,198,089) at May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------
Investments in repurchase agreements $ 5,640,258
- ------------------------------------------------------------------------
Investments in other securities 41,316,865
- ------------------------------------------------------------------------ -----------
Total investments, at value (identified and tax cost, $48,300,813)
(Note 2A and 2B) $46,957,123
- --------------------------------------------------------------------------------------
Cash 60,313
- --------------------------------------------------------------------------------------
Interest receivable 468,955
- --------------------------------------------------------------------------------------
Receivable for Fund shares sold 45,466
- --------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 3,631
- -------------------------------------------------------------------------------------- -----------
Total assets 47,535,488
- --------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------
Dividends payable 171,898
- ------------------------------------------------------------------------
Payable for Fund shares redeemed 130,134
- ------------------------------------------------------------------------
Accrued expenses 35,347
- ------------------------------------------------------------------------ -----------
Total liabilities 337,379
- -------------------------------------------------------------------------------------- -----------
NET ASSETS for 4,858,677 shares of beneficial interest outstanding $47,198,109
- -------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------
Paid-in capital $48,567,483
- --------------------------------------------------------------------------------------
Net unrealized depreciation of investments (1,343,690)
- --------------------------------------------------------------------------------------
Accumulated net realized loss on investments (25,684)
- -------------------------------------------------------------------------------------- -----------
Total Net Assets $47,198,109
- -------------------------------------------------------------------------------------- -----------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------
(Net assets of $47,198,109 / 4,858,677 shares of beneficial interest outstanding) $ 9.71
- -------------------------------------------------------------------------------------- -----------
Computation of Offering Price (100/98 of $9.71)* $ 9.91
- -------------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest income (Note 2C) $ 941,492
- --------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------
Investment advisory fee** $144,135
- ---------------------------------------------------------------------
Trustees' fees 223
- ---------------------------------------------------------------------
Administrative personnel and services fees** 28,093
- ---------------------------------------------------------------------
Custodian fees** 5,154
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses** 6,411
- ---------------------------------------------------------------------
Legal fees 2,634
- ---------------------------------------------------------------------
Printing and postage 7,901
- ---------------------------------------------------------------------
Portfolio accounting services** 24,569
- ---------------------------------------------------------------------
Insurance premiums 2,545
- ---------------------------------------------------------------------
Miscellaneous 2,393
- --------------------------------------------------------------------- --------
Total expenses 224,058
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee** 144,135
- --------------------------------------------------------------------- --------
Net expenses 79,923
- -------------------------------------------------------------------------------- -----------
Net investment income 861,569
- -------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized loss on investment transactions (identified cost basis) (25,684)
- --------------------------------------------------------------------------------
Net change in unrealized depreciation of investments (1,343,690)
- -------------------------------------------------------------------------------- -----------
Net realized and unrealized loss on investments (1,369,374)
- -------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ (507,805)
- -------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from December 13, 1993 (date of initial public investment) to
May 31, 1994.
** See Note 4.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
(UNAUDITED)
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 861,569
- ----------------------------------------------------------------------------
Net realized loss on investment transactions ($25,684 net loss as computed
for federal income tax purposes) (25,684)
- ----------------------------------------------------------------------------
Net change in unrealized depreciation of investments (1,343,690)
- ---------------------------------------------------------------------------- -------------
Change in net assets resulting from operations (507,805)
- ---------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment income (861,569)
- ---------------------------------------------------------------------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ----------------------------------------------------------------------------
Net proceeds from sale of shares 52,728,032
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 3,898
- ----------------------------------------------------------------------------
Cost of shares redeemed (4,164,447)
- ---------------------------------------------------------------------------- -------------
Change in net assets from Fund share transactions 48,567,483
- ---------------------------------------------------------------------------- -------------
Change in net assets 47,198,109
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------- -------------
End of period $47,198,109
- ---------------------------------------------------------------------------- -------------
</TABLE>
* For the period from December 13, 1993 (date of initial public investment) to
May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
First Priority Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Trust consists of four diversified portfolios. The financial statements included
herein present only those of First Priority Limited Maturity Government Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Corporate bonds and other fixed income
securities/asset backed securities are valued at the last sale price reported
on national securities exchanges on that day, if available. Otherwise,
corporate bonds and other fixed income securities/asset backed securities and
short-term obligations are valued at the prices provided by an independent
pricing service. Short-term securities with remaining maturities of sixty
days, or less may be stated at amortized cost, which approximates value.
Investments in other regulated investment companies are valued at net asset
value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure the value at least equals the principal
amount of the repurchase agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Fund's adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees ("Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by the
Internal Revenue Code, as amended ("Code"). Distributions to shareholders are
recorded on the ex-dividend date.
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being amortized
using the straight-line method over a period of five years from the Fund's
commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1994*
- ----------------------------------------------------------------------------- ------------
<S> <C>
Shares sold 5,281,626
- -----------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 400
- -----------------------------------------------------------------------------
Shares redeemed (423,349)
- ----------------------------------------------------------------------------- -----------
Net change resulting from Fund Share transactions 4,858,677
- ----------------------------------------------------------------------------- -----------
</TABLE>
* For the period from December 13, 1993 (date of initial public investment) to
May 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--First Alabama Bank, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.70 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The fee is based on the
level of average aggregate net assets of the Trust for the period.
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type and number of accounts and transactions made by
shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $30,000. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following December 7, 1993 (date the Fund's portfolio first became effective).
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1994 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $46,073,960
- ------------------------------------------------------------------------------- -----------
SALES $ 2,005,273
- ------------------------------------------------------------------------------- -----------
</TABLE>
K. Please note that the name of the Fund's legal counsel is now Dickstein,
Shapiro & Morin, L.L.P. References to "Dickstein, Shapiro & Morin", under the
sub-section entitled "Legal Counsel" on page 9, and on the inside back cover
are revised accordingly.
L. Please note that the address of Deloitte & Touche, the Fund's independent
auditors, is now 2500 One PPG Place, Pittsburgh, Pennsylvania 15222-5401.
References under the sub-section entitled "Independent Auditors" page 9, and
on the inside back cover are revised accordingly.
FIRST PRIORITY LIMITED MATURITY GOVERNMENT FUND ( THE "FUND")
(A PORTFOLIO OF FIRST PRIORITY FUNDS)
- --------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 7, 1993
A. Please insert the following as a second paragraph under the sub-section
entitled "Fund Ownership" on page 7:
"As of May 31, 1994, HUBCO, c/o First Alabama Bank, Birmingham, Alabama,
acting in various capacities for numerous accounts, was the owner of
record of approximately 4,809,951 shares (99.01%) of the Fund and
therefore, may, for certain purposes, be deemed to control the Fund and
be able to effect the outcome of certain matters presented for a vote of
shareholders."
B. Under the section entitled "Investment Advisory Services" which begins
on page 7, please insert the following as the second sentence in the
sub-section entitled "Advisory Fees" on page 8:
"During the period from December 13, 1993, (date of initial public
investment) through May 31, 1994, the Adviser earned $144,135, all of
which was voluntarily waived."
C. Please insert the following information as the second sentence of the
first paragraph under the section entitled "Administrative Services" on
page 8:
"During the period from December 13, 1993, (date of initial public
investment) to May 31, 1994, the Fund incurred administrative service
costs of $28,093."
D. Please insert the following information as the third paragraph under the
section entitled "Administrative Services" on page 8:
"Federated Services Company ("FServ") is the Fund portfolio accounting
agent, transfer agent and dividend delivering agent. For the period from
December 13, 1993, (date of initial public investment) to May 31, 1994,
FServ received from the Fund fees equal to $24,569 for the portfolio
accounting services."
E. Please insert the following as the third paragraph under the sub-section
entitled "Distribution Plan" under the section entitled "Purchasing
Shares" on page 9:
"During the period from December 13, 1993, (date of initial public
investment) to May 31, 1994, there were no distribution fees."
F. Please insert the following information as the first paragraph under the
section "Total Return" on page 11:
"The Fund's cumulative total return from December 13, 1993, (date of
initial public investment) to May 31, 1994, was -2.95%. Cumulative total
return reflects the Fund's total performance over a specific period of
time. This total return assumes and is reduced by the payment of the
maximum sales load. The Fund's total return is representative of
approximately 5 months of activity since the Fund's start of
performance."
G. Please insert the following information as the first paragraph under the
section "Yield" on page 11:
"The Fund's yield for the thirty-day period, ended May 31, 1994, was
4.96%."
June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
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Distributor
G00134-01 (6/94)
